Do you want to get the best mortgage rate? Of course! But if you’re shopping for the best rate you’ve got to look at the macro events happening in the wider Canadian and global economies. When you understand the reasons why a fixed rate is priced you can make an informed decision with confidence.
Do you know what keeps mortgage interest rates low? It’s bad news! Simply put, when economic news is doom & gloom it keeps downwards pressure on mortgage interest rates. Why? Because when news is bad investors demand safe places to put their money specifically Government of Canada bonds which keeps their yield down. Mortgage interest rates have a direct relationship to bond yields.
This week we have the reports of a Stalling Economy here at home along with renewed fears in Europe and riots in Greece.
Another important indicator which predicts the direction of interest rates is inflation. As inflation increases so does the need to raise interest rates especially the Bank of Canada prime rate which variable rate mortgages are based on. Last Friday’s statistics Canada report showed that inflation is actually more deflationary currently in Canada and that interest rates aren’t moving for a while.
So you want a better mortgage rate
Now that the macro economics talk is out of the way, what does this all boil down to: LOW INTEREST RATES. There isn’t any upwards pressure currently on mortgage interest rates. The fixed 5 year at 3.09% is a good option providing good value for a long term. If you want great value and lower rate consider a fixed 3 year rate at 2.69%.
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